ERPM Insights

Recently I met up with a close friend of mine whom I hadn’t seen in a couple of years for a chat and catching up. He is a qualified accountant and finance professional working in the financial services industry in Zimbabwe.

On top of the social chatter, we started discussing the evolving role of finance, in particular finance business partnering and the impact of Industry 4.0 on the profession.

As our discussion continued, we shared experiences, what has worked and what hasn’t worked so far in our respective organizations, as well as the way forward.

One thing that intrigued me was that my friend didn’t by any chance try hard to hide his frustrations emanating from his every day job. Chief among the frustrations was the fact that finance wasn’t highly regarded within his organization as he would have loved it to be.

I probed further trying to understand why he had reached to that conclusion.

Although my friend mentioned that his organization has made reasonable progress in ensuring that finance transforms from the commonly perceived scorekeeper function to a trusted business partner, many business leaders still perceive finance’s role as that of balancing books and providing rudimentary analysis.

As a result, finance is not invited to the decision making table and asked for its contribution.

Keen to find out why business leaders didn’t see any value in engaging finance in the operational affairs, I asked deeper questions until we both agreed that his team was clogging business partners with too many performance reports, his organization lacked a clearly defined data management model, and finance personnel need to be empowered to collaborate with the business effectively.

Far Too Many Reports and Far Too Little Insights

As it turns out, it’s not only business leaders in my friend’s place of work who are constantly being weighed down by a mass of performance reports. There are plenty.

With the volume of both internal and external data increasing exponentially, the demand on finance teams to provide insightful, relevant and timely management information to support fact-based decision making isn’t going down either.

Because of this unrelenting demand for more information it is easy to succumb to the thinking that more is better, resulting in finance teams working round-the-clock to produce reports that neither meet the requests of stakeholders nor offer the business an informed, value-adding view of its performance.

The problem with having too many reports is that the business is forced to track and monitor far too many metrics which, in most cases, are in conflict with one another and offer far too little insight.

Additionally, the business lacks a clear line of sight to clearly analyse past and anticipated performance in order to make better decisions. In today’s exponentially growing data age, decision makers are looking for essential information to make more confident and effective decisions that focuses their attention on activities that truly matter, and provide a consistent view of performance across the business.

To avoid this common pitfall of repeatedly creating useless performance reports that no one dares to read, finance needs to regularly engage with business leaders and take time to clearly understand what information they actually need to achieve their strategic objectives and consequently drive value.

Delivering this information in an efficient and effective manner is key to finance generating business trust as well as empowering the business to proactively respond to emerging opportunities and threats.

Lack of a Robust Data Governance Framework

After seriously discussing the problem of too many performance reports, my friend further raised an important question. What if a business leader requests a specific report and we do not have all the necessary information to adequately support our findings? Before answering him, I fired a question back at him. How are you currently handling these requests?

To my complete surprise he responded, finance produces reports that we believe are correct and if we do not hear back from the business leader all is considered in order. At this point in time, I was quickly reminded of the expression Garbage In – Garbage Out. No matter how logical our thinking and analysis is, as long as the inputs are invalid the results will be incorrect.

The same applies to business performance reporting. In today’s data-driven and tech-enabled economy, optimized and appropriate use of data is central to helping the business make enhanced decisions, create competitive advantage and successfully execute its strategy.

Thus, data quality is imperative, requiring finance leaders to ensure that there is absolute trust in the information provided to the business.

From discussing with my friend, it became clear that a business requires the right data to support its integrated set of defined key performance indicators (KPIs) and to maintain the integrity of this data, it must be supported by a robust governance structure.

Today’s volatile and dynamic business environment means the organization’s strategic priorities are always changing, as well as its information needs. As a result, the reporting function also needs to keep pace with this constantly changing landscape.

Building a cohesive information and data governance framework ensures common KPIs linked to strategic and operational decision making are used consistently across the business.

KPIs, regardless of their focus are only as consistent as the underlying data, and poor data input will produce inconsistent measures, even if they are labelled as the same KPI. This is why getting the basic data structures and data feeds right is so fundamental in providing decision support that can be trusted.

Additionally, due to the fact that different functions of the business use data for multiple different information needs, a robust data governance framework leads to a single version of the truth via enforcement of consistent information standards, creates awareness of where the performance data is housed and how it can be accessed.

Since the main goal of performance reporting is to provide management with real-time information with proactive comparators, a constant review of the information requirements and data governance framework ensures that performance measures remain relevant.

What I also picked up from my friend is that despite significant growth in the potential use of external data to drive better decision making, many businesses remain predominantly reliant on internal data to drive key business performance decisions.

They are grappling to incorporate this type of data across different business processes, mainly because of the differences in the structure of internal and external data sets.

By incorporating external comparators in their decision making processes, management will be able to identify areas where the business needs to ramp up through investments, and often more prominently, where it is already ahead of the competition, but must continue to focus on to uphold or create a new advantage.

Without this crucial information at their disposal, it is impractical for finance teams to clearly understand the major drivers of their business performance, produce insightful analysis, partner with key decision makers and support strategic decision making.

Business Leaders Discounting Finance’s Capabilities

In order to become effective business partners and provide relevant decision support it is imperative for finance teams to get as much exposure as possible to business-wide decision making. Unfortunately, getting this exposure remains a distant dream for many capable finance teams.

Because business leaders see finance personnel only as gatekeepers and not strategic business advisors, there is little motivation on their part to empower finance to collaborate effectively with the business on a larger scale.

As we started discussing the promises and perils of Industry 4.0 with my friend, he was very much surprised with how far behind his organization is in terms of digital transformation and process automation.

My friend is not alone on this boat; many finance teams are still stuck with legacy financial systems, tools and processes; spending a significant portion of their time on low value-adding transactional activities such as arduous data extraction and manipulation or traditional month-end activities, and little time on positive analysis and decision support. This is detrimental to effective performance reporting.

Performance reporting will only succeed if finance teams are suitably equipped to deliver high-quality insights that support decision making empowered with deployment of reporting technologies.

Even if the business presents an opportunity to collaborate, time alone is not sufficient. There is also a need to create an environment that allows finance people to develop appropriate capabilities, some of which may not come innately to many technical finance people.

One way of fostering this environment involves running finance training programmes that focus heavily on softer skills such as leadership development, communication, change management and stakeholder management, as well as on-the-job training for traits such as commercial acumen, and less on the technical or transactional processes which are easy candidates for automation and do not constitute a large portion of finance’s everyday job.

As with any other form of investment, the organization must be able to reap rewards from the training programmes. It makes no economic sense to spend substantial amount of resources trying to boost finance function productivity and in turn get rewarded with mediocre results.

It is therefore critical that finance personnel sent out for training exhibit the right behaviours and have the confidence to work with the business to interpret reports and constructively challenge strategic decision making to drive more effective decision making.

This in turn will assist finance shed its image as a mere service provider, elude mundane tasks, enhance its reputation and become part of the decision making crème de la crème informing business decisions with deep insights and recommendations.

In addition to training programmes, the organization also needs to invest in appropriate enabling technology that help with data analysis and interpretation in real-time, providing the organization with the necessary speed and quality that it requires to stay ahead, as well as allowing finance to demonstrate their analytical skills and become more influential as business partners.

Addressing the above common pitfalls is key to streamlining an organization’s performance measurement and reporting processes, and ensuring that senior management regularly receive relevant, insightful and near real-time information necessary to improve strategic decision making and ultimately business performance.

What other common pitfalls have you experienced in delivering high-quality performance reporting?